Kroger Buys Albertsons
Montana’s Albertsons stores will soon be Kroger’s. Kroger announced plans in mid-October to acquire Albertsons 4,500 stores in 48 states in a nearly $25 billion deal.
The expectation that shoppers will move to buying more private label and generic brands is part of what made Albertson’s a desirable acquisition, according to Kroger CEO Rodney McMullen. “A lot of supply chain savings will really be helping improve freshness of product because we’ll have warehouses closer to the stores and you’ll be able to take a day or two out of the cycle for those fresh products as well. … When I look at their (Albertsons’ private label) brands, they’ve done a great job. … Between the two companies, we have an amazing portfolio.”
Kroger is quoted in the company’s announcement that they looked closely at Albertsons’ O Organics house brand when it created its own SimpleTruth label that is now a $3 billion brand. Private label or house brands are expected to be key tools in attracting and retaining customers as more shoppers turn to generic store brands to offset the cost of inflation. Combined, Kroger and Albertsons sell $43 billion in private-label products a year.
Kroger does not believe that customers will be greatly impacted by the new ownership. Job cutss are not part of the plan, although there is a possibility that some Albertson stores will eventually be closed. The expectation is, rather, that the company will be doing more hiring.
“It does give us national scale, and we’ll be able to leverage technology and other things (using that) larger scale. … (Although) they run smaller stores better than what Kroger does,” said McMullen.
While Kroger expects to cut $1 billion in combined operating expenses, most of that is expected from improved sourcing (buying power) and more efficient manufacturing and distribution. In a complementary acquisition, there tends to be fewer overlapping functions and fewer resulting job cuts. Still, thousands of associates wouldn’t join Kroger because potentially hundreds of stores will be spun off to mollify antitrust concerns of regulators.
The acquisition mostly expands Kroger into territories where it has a thin presence or has no stores at all.
Besides Kroger stores, the Cincinnati-based grocer operates several regional supermarket chains in 35 states, including Fred Meyer, Harris Teeter, Ralphs, Mariano’s, Fry’s, Smith’s, King Soopers, QFC and others. The company has nearly 2,800 stores and employs 420,000 workers. The deal would add the Albertsons, Acme, Safeway, Vons, Jewel-Osco, Shaws and other regional names. It would give Kroger stores in five New England states, New York and Pennsylvania, among others.
The deal isn’t expected to close until early 2024 after regulatory and antitrust review.